Workday Class A Earnings Call Nuggets: Acquisitions and Add-On Products

Workday Inc Class A (NYSE:WDAY) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.


John DiFucci – JPMorgan: You have a lot of development projects going on right now, Big Data, international payroll recruiting, but you just reached over 500 million with the converts. I guess what area should we be thinking about that are areas that you would consider acquiring technology. I mean you’ve only done one I think in your history with Cape Clear. What other areas might you consider acquiring versus developing in-house?

Aneel Bhusri – Chairman, Co-Founder and Co-CEO: Acquisitions are not a huge part of our strategy I think the Cape Clear acquisition is illustrative of the kinds of acquisitions we do really around core technologies that were things that we were not building on Workday and there is a couple around visualization as an example or a technology and analytics that could be of interest. But there is nothing immediate on the radar.

John DiFucci – JPMorgan: And just Mark a follow-up, I just want to clarify something, you said — I think you said Q3 billings would be flat to Q2, I just want to, was that total billings because if I look over the last couple of years you’ve actually seen a decline in total billings, I want to look at revenue plus change in total deferred or was that, when I look at change in current deferred because you had some you’ve been billing just annually more recently that has been flat quarter-to-quarter last couple of years?

Mark Peek – CFO: The color we gave John is for total billings and part of that is as we have moved more towards just collecting one year of ACV on new contracts. Things are beginning to flatten out over time and so just as we looked at the seasonality versus last year, we think it’s going to be approximately flat to the second quarter.

Add-On Products

Heather Bellini – Goldman Sachs: I just had two questions guys, the first you mentioned the five year deals that you signed did some of those came more than one year upfront because it seems like the outperformance on deferred versus the street with more in long-term versus short term? And then, the second question is can you give us an update Aneel on the top two add-on products in the quarter and who you think you’re displacing with those wins? Thank you.

Mark Peek – CFO: Heather on the billings, we had one five-year deal that was 8 figure and they did pay three years as the industrial ACV which impacted the long-term unearned revenue.

Aneel Bhusri – Chairman, Co-Founder and Co-CEO: In terms of add-on products we don’t typically disclose any rank order. I do know we had a quarter in terms of payroll both as an attach as part of core HR as well as add-ons. At the Rising Analyst Day we are going to get into a lot more details about the new product initiatives and where you might see attachments going forward. And the new product initiatives are right on track and we’re very pleased with where they are today. Competitively it’s the same people. We’re replacing Oracle, SAP primarily on the HR side, some handful of wins against Ultimate which are replacements as well. I think the only new one I would highlight is that as we’re getting traction in financials and as we know the product is moving upmarket, in the midmarket arena we’re beginning to replace Microsoft Dynamics and all the different flavors.